The encyclopedia · Finance & Accounting · Financial decision · 2011–2015
Zirtual ran out of money overnight and fired everyone by email
The virtual-assistant service turned 400 contractors into salaried staff, burned $5.5M in four years, and shut overnight on 10 August 2015.
Zirtual · 2015-08
What happened
Zirtual launched in 2011 selling US-based virtual assistants to busy professionals, from $399 a month. Unlike gig platforms, it employed its assistants full-time with benefits — quality was the pitch. Tony Hsieh, VegasTechFund and Mayfield Fund were among its backers.
The employment model was the hole: converting contractors to full-time employees added 20–30 percent to costs, and founder Maren Kate Donovan later conceded the company had grown its staff faster than demand. Zirtual raised roughly $5 million over three years, plus $650,000 of bridge debt weeks before the end.
On 10 August 2015 customers received an email saying Zirtual was 'pausing all operations' because of market circumstances and financial constraints; the roughly 500 full-time staff learned the company was simply closing, with pay for the previous week and their health insurance left in question. Two days later Startups.co bought the assets in an all-stock deal and relaunched the service with a skeleton team.
Why it happened
- Full-time employment was the product and the liability: benefits cost 20–30% more than the contractor model it rejected.
- Headcount outran demand: ~500 salaried staff against ~$5M raised left no room for a slow month.
- There was no soft landing: customers got a 'pause' email and staff got an overnight shutdown notice.
The lesson
Zirtual priced quality with salaried staff on subscription revenue; when headcount outran demand, $5.5M and four years ended in one overnight email.
Aftermath
Startups.co relaunched the service a week later with a small team. The original Zirtual remains the textbook case of a fixed-cost model built on subscription revenue.
Sources
- TechCrunch, 10 August 2015 — Virtual Assistant Startup Zirtual Is 'Pausing All Operations' (email to customers 10 August 2015: pausing all operations due to 'a combination of market circumstances and financial constraints'; ~500 full-time employees with benefits blindsided, uncertain about previous week's pay and health insurance; CEO Maren Kate Donovan told staff the company was out of business as of Friday evening; pricing from $399/month; 400+ assistants as of April 2015; recently raised $650,000 debt financing toward a $3M round; investors included Tony Hsieh, VegasTechFund, Mayfield Fund)
- Fortune, 12 August 2015 — On-demand startup Zirtual will be back in business thanks to Startups.co (more than 400 employees laid off unexpectedly on Monday; raised almost $5M over three years; Donovan attributed the burn rate to converting contractors to full-time employees with benefits, adding 20–30% to costs; Startups.co CEO Wil Schroter: failure came from growing staff faster than demand; acquired by Startups.co in all-stock transaction; service to resume with smaller team)
- Ideaproof — Zirtual Shutdown: When Employees Learned via 3am Email (founded 2011; burned through $5.5M in 4 years; over 400 US-based assistants at peak, nearly 500 hired within five years; unsustainable burn rate; acquired by Startups.co after sudden 2015 closure, resumed with part of original staff)
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